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 November 19, 1999

Trammell Crow adding 2nd Coal Creek facility

LOUISVILLE — Trammell Crow Co. is moving ahead to construct the second of two speculative office buildings at Coal Creek Business Park in Louisville — even though the first has yet to be leased.

Industry observers say this is an unusual move since most developers complete the tenant leasing of a speculative building before breaking ground on a second project.

Doug Snyder, project manager for Trammell Crow, said the company’s action, however, is not particularly unusual. “The owner views these two buildings as one building,” he said.

A late entrant into the Boulder corridor market, Trammell Crow is building the structures near the intersection of McCaslin Boulevard and U.S. 36.

The first building is the 75,000-square-foot Signature Building. Its shell and core have been completed, and the company now is negotiating with prospective tenants, Snyder said.

Across the street from that building will be Corporate Center One, a 100,000-square-foot building. Snyder said the shell of that building is expected to be completed by November. The company then will start negotiating leases and complete the tenant finish.

Some industry observers say it’s odd that a developer would start a second speculative project before leasing out the first project. Trammell Crow’s first building isn’t as attractive as other new office buildings in the area and their pricing has been higher than the competition’s, they said.

One source who asked not to be identified said the fundamental problem is that Trammell Crow didn’t provide an appropriate product for the U.S. 36 market niche. The company’s inability to lease the building since it was completed this summer is indicative of an oversupply in the market, he said, and the construction of a building that doesn’t meet tenant needs.

“Too many people came in and patterned their product after Interlocken (business park), and that’s not what the tenants wanted in this area,” he said.

The Louisville location also has deteriorated somewhat as an office site because of surrounding hotels that have opened.

“It could be vacant a long time,” the source said.

Compared to Interlocken, which offers Class-A space, this area demands more Class-B space, sources said. But The Signature Building aims at serving Class-A tenants with a Class-A price-point.

Both of the new buildings, the Signature Building and Corporate Center One, are two-story facilities composed of stucco and brick.

Snyder said the buildings will lease for about $17.50 per square foot, with tenants paying all operating expenses.

Chris Phenicie, a director with the firm Cushman & Wakefield, said this market became “super hot” in 1994 and that its appeal continued through 1998. He said he expects the market to pull back by next year.

In 1995 and 1996, new buildings were 100 percent pre-leased before construction was completed, he said. As more supply came on the market, pre-leasing declined.

Today the best a developer can hope for are buildings about 50 percent pre-leased before construction is completed. “That’s a reasonable expectation,” he said.

Ken Gooden, a broker with the Denver office of Staubach Co., said he’s confident Trammell Crow will lease the first building because there is enough demand for space from 25,000 to 50,000 square feet.

“Your options aren’t as many as there were a few months ago,” he said. “They hit the market at a tough time. Their first building came online as Superior Point, Eldorado Ridge and Centennial Valley Corporate Center were leasing,” he said.

Gooden said the market is at least a year away from any new office building project being completed in the area.

He noted that Trammell Crow’s second building probably will have no trouble finding tenants. “It’s entering the market at a better time without so much competition,” he said.

As part of the office park, an 88-unit Residence Inn is slated to be completed in January.

“All the site work is done,” Snyder said.

Snyder said the business park includes six lots. Another lot will house Corporate Center Two, a 125,000-square-foot office building. No dates have been set yet to build this facility, and construction will depend on market demand.

Two smaller one-acre lots also are included in the project, he said. They probably will house a restaurant or bank in the future.

LOUISVILLE — Trammell Crow Co. is moving ahead to construct the second of two speculative office buildings at Coal Creek Business Park in Louisville — even though the first has yet to be leased.

Industry observers say this is an unusual move since most developers complete the tenant leasing of a speculative building before breaking ground on a second project.

Doug Snyder, project manager for Trammell Crow, said the company’s action, however, is not particularly unusual. “The owner views these two buildings as one building,” he said.

A late entrant into the Boulder corridor market, Trammell Crow is building the structures near the…

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